Extracted Text

The following text was automatically extracted from the image on this page using optical character recognition software:

The Impacts and Costs of Climate Changestatistical range around these numbers was found to be much larger, and the study also concluded thatit was misleading to present the numbers as single estimates due to the uncertainty in the values. Thestudy also undertook modelling analysis of emissions in future years, and found significant increasesin the values for future emissions. The analysis showed rises of 2 to 3% per year- so for example thecentral illustrative estimate rose from 20- 25/tCO2 from emissions in the year 2000 to 34 Euro/tCO2by 2020 (in 2000 prices).The values from such studies are dependant on a number of key assumptions, notably the discount rateused and the aggregation approach for impacts in different regions (whether distributional weights, i.e.equity weights7) are used. The choice of discount rate has a very large effect on any values, becausemost impacts of climate change occur in the future. Similarly most impacts occur in developingcountries, and so the decision on whether to equity weight or not has a significantly bearing on theresults8.Economic Benefits of different stabilisation targetsEmerging work is starting to assess the potential benefits of different stabilisation targets. One recentstudy9 has undertaken an expert consultation on the social costs of specific climate change scenarios.The scenarios included three temperature scenarios (<2C, 2-4C, >4C), but also included variableswith respect to major events, socially contingent effects, discount rates, equity weighting, etc. Mostexperts believed that under conditions of low temperature change (2C), the marginal social costswould be low, most probably below Euro 15/tCO2. In contrast, for high temperature change (>4 ),the expert response was that costs would be high: probably greater than Euro 30/tCO2 and plausibly ashigh as 140Euro/tCO2.The current study has also commissioned two new pieces of work from the FUND and PAGE models,to investigate the potential benefits of different stabilisation targets. The PAGE2002 model10 has beenused to examine a number of different stabilisation targets. The results show costs of* Euro 74 trillion from climate change under the baseline business as usual scenario for an averagediscount rate of 2% pure rate of time preference and including equity weighting", falling to* Euro 43 trillion under a 650 CO2 equivalent ppm stabilisation scenario, and* Euro 32 trillion under a 550 CO2 equivalent ppm stabilisation scenario.The analysis has also used the FUND model to assess the potential social costs under different CO2stabilisation levels. This analysis above shows a strong decline in the marginal social cost of currentemissions with lower CO2 stabilisation concentrations.7 By using equity weighting, it is possible to take into account how the costs and benefits accrue to different groups in society. Policies thatdeliver greater net benefit to individuals in lower income groups are rated more favourably than those that benefit higher. Equity weights cantherefore be used to explicitly recognise distributional effects within a policy's net present value. In the case of climate change, we are tryingto recognise that vulnerable societies are likely to see significant impacts, and therefore that climate change mitigation policy will have a dis-proportionately larger benefit to these groups.8 Most models show that at small to moderate climate change, poorer countries (Africa, India, and Latin America) are net economic losers,whereas richer countries, especially mid - Northern latitudes may actually gain. Essentially, the more weight we put on the distribution ofthe impacts of climate change in developing countries, the more severe the aggregate impacts are.9Tom Downing at the Stockholm Environment Institute (Oxford office), as part of recent work for Defra (UK).10 Run by Chris Hope at the Judge Institute at the University of Cambridge.

11Values are in 2000 prices. Note a trillion is a million million. This is based on a time horizon of 2200 and discounted back to a netpresent value. The analysis for a business as usual run is based on the A2 scenario. The model has also assessed 550 ppm and 450 ppm CO2concentrations levels. The value of a 2% PRTP is broadly consistent with the current EC recommended discount rate of 4% social rate oftime preference (assuming average GDP per capita growth of 2%). Note the use of lower discount rates, or declining discount rate schemeswould give higher values than presented- the use of higher discount rates would give lower values. For equity weighting an elasticity ofutility with respect to consumption of minus 1 has been used. Again the use of different assumptions on equity weighting would givedifferent values.